Page 285 - Microsoft Word - 00 ACCA F9 IWB prelims 2017.docx

Sources of finance

 Hybrids – loan notes with warrants

Give the bond holder the right to subscribe at a fixed future date for a certain
number of ordinary shares at a predetermined price.

– the loan notes are not converted. They remain in place after the
subscription date

– can be used to make the debt more attractive and able to set a low
coupon rate

– holder gets right to buy shares at attractive price

– holder can sell on the warrants, effectively reducing the cost of purchasing
the debt

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